The Stock Exchange of Thailand (SET) has warned shareholders of Thai utility Superblock about possible issues with a US$407 million investment in five solar energy companies, after independent financial advisor Sage Capital expressed concern about the acquisitions.

Earlier this month, Super Solar Energy Group, a wholly-owned subsidiary of Superblock, announced in a filing on the SET that it would acquire five companies with a combined capacity of 290MW of solar projects for THB14.45 billion (US$407.3 billion).

However, Sage Capital has cited issues with the acquisition of two out of the five companies, namely Energy Serve (ESERVE) and Power Technology International (PTI). Sage said their fair value is lower than the acquisition price.

Moreover, three solar projects from ESERVE have not yet been awarded PPAs from the Provincial Electricity Authority (PEA).

A new filing on the SET, which cited Sage, said: “There is still risk from these projects failing to obtain the PPA.”

Sage was also reported to hold the following opinion: “The condition for the five transactions requiring the company to make a huge payment in advance to the counterparties in each transaction is inappropriate and not consistent with the usual condition for sale and purchase agreements in general, which is considered unfair to the company and leads to an opportunity cost on the funds prepaid by the company to the counterparties.”

As a consequence, SET recommended Superblock’s shareholders to “carefully study” the Sage Capital report and attend an extraordinary meeting to be held on 30 October in Bangkok in order to vote on the deal.

Sage Capital did list some pros of entering into the five transactions, including strengthening income stability, boosting profits, increasing dividend payment ability of the Company and helping to create economies of scale.

Nevertheless it added the company would bear higher debt and interest burden from all the transactions. It also cited potential issues with delayed project completion, the subsequent loss of PPAs, followed by the loss of funds invested in land acquisition.

The SET filing concluded: “Considering all 5 transactions, IFA have an opinion that shareholders should not approve the investment in PTI and ESERVE.”

The Board of Directors and Audit Committee, however, still considers the transaction to be “reasonable” for the business with its strengthening of operations and revenue generation and therefore recommends that the shareholders approve the transaction.